Banks’ stocks rise after stress test results, boosting futures.

(Reuters) – U.S. stock index futures are on the rise as banking stocks clear the Federal Reserve’s annual stress test, while megacap stocks continue to gain momentum despite the possibility of further interest rate hikes.

Bank of America is up 1.1% in premarket trading, joined by JPMorgan Chase, Goldman Sachs, and Wells Fargo, which all sailed through the Fed’s annual test, demonstrating their ability to withstand a severe economic downturn.

Bank of New York Mellon and Charles Schwab are also experiencing a nearly 2% increase, while Citigroup sees a slight decline of 0.5%.

Yesterday, the S&P 500 and Dow closed lower after Fed Chair Jerome Powell stated that he does not anticipate inflation reaching the central bank’s target rate “this year or next year.” Additionally, most policymakers expect the central bank to raise interest rates at least twice more by the end of the year.

As a result of these hawkish views, traders are now predicting an 81.8% chance of a 25 basis point interest rate hike to a range of 5.25%-5.50% during the Fed’s July meeting, up from 74.4% a week ago, according to CME Group’s Fedwatch tool.

Investors eagerly await fresh data, including the final reading of first-quarter U.S. GDP and weekly jobless claims, scheduled for release at 8:30 a.m. ET, to gain insights into the future of interest rates.

The Personal Consumption Expenditure index (PCE), the Fed’s preferred inflation gauge, for May will be released on Friday. Economists polled by Reuters expect core rates to remain steady at 4.7%.

At 5:42 a.m. ET, Dow e-minis are up 66 points, or 0.19%, S&P 500 e-minis are up 8 points, or 0.18%, and Nasdaq 100 e-minis are up 38 points, or 0.25%.

Micron Technology is experiencing a 3.8% increase after surpassing expectations for its third-quarter results, driven by high demand for its memory chips.

Apple is inching 0.2% higher, following its record-high close on Thursday, and is getting closer to achieving a $3 trillion market capitalization.

Shares of other high-growth companies, such as Tesla and Nvidia, have also risen by more than 1% each.

Walt Disney, however, has dipped 0.5% after a report revealed that KeyBanc downgraded the stock to “sector weight” from “overweight”.

(Reporting by Sruthi Shankar in Bengaluru; Editing by Shinjini Ganguli)

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